According to a recent analysis conducted by the Institute for Fiscal Studies (IFS), higher-income families were the primary beneficiaries of the Help to Buy mortgage programs initiated by George Osborne in the 2010s.
Introduced in 2013 by the coalition government of the Conservative Party and the Liberal Democrats, Help to Buy comprised two distinct initiatives aimed at facilitating home ownership amid a surge in housing prices.
The first initiative involved government-backed loans designed to lower the deposit amounts required from buyers. The second component was a mortgage guarantee program that mitigated part of the risk for lenders on high loan-to-value mortgages.
Both programs were applicable to homes valued up to £600,000, and by the 2014-15 period, they played a role in approximately 20% of purchases made by first-time buyers.
However, utilizing a novel methodology that incorporated survey data and local real estate values, the IFS findings indicate that the majority of advantages were realized by higher earners who would likely have been able to afford a home regardless—especially those residing outside London and the southeastern region, where properties were generally less costly.
Bee Boileau, a research economist at the IFS and one of the authors of the report, noted, “While Help to Buy policies theoretically assist first-time buyers in entering the housing market, they can inadvertently inflate property prices and place the financial risk of loans on the government, which the private sector may be reluctant to undertake.”
The research further states, “Our findings suggest that the Help to Buy programs launched in 2013 primarily impacted higher-income households by making home purchases more accessible.”
It was also highlighted that these individuals would likely have been able to accumulate a minimum deposit fairly quickly even in the absence of Help to Buy, indicating that the schemes may have merely expedited their home acquisition by a few years rather than fundamentally altering their ability to become homeowners in the long run.
The analysis indicates that the mortgage guarantee program had “limited effects on affordability,” as buyers remained restricted by the income multiples they could borrow against.
Conversely, the loan initiative was deemed “more vital for nearly all households” in enhancing the affordability of local housing options. However, its impact was somewhat limited, as it only applied to newly constructed properties, rendering its overall effect “muted,” as per the IFS.
The thinktank’s analysis suggests that the two schemes did not significantly influence social mobility. Boileau remarked that if future administrations aim to address inequality, they could focus assistance on lower-income households, albeit this approach might entail greater risk for taxpayers.
Help to Buy has faced criticism from numerous experts for inflating housing prices without effectively increasing the supply of homes. A 2022 report from the House of Lords built environment committee suggested that funds allocated to the scheme would be more beneficial if directed toward enhancing housing availability.
A revised version of the mortgage guarantee program was reinstated in 2021 and subsequently made permanent by the Labour government last year, with the intention of ensuring the continued availability of 95% mortgages.
James Cleverly, the housing secretary under the Conservative government, defended the Help to Buy initiative, asserting, “The Help to Buy schemes established by the previous Conservative administration provided thousands of individuals with the opportunity to achieve their dream of homeownership. In contrast, under Labour, first-time buyers are facing increasing challenges, with a significant decline in housebuilding and soaring stamp duty fees.”
